Request for Reimbursement of Percentage of Sales Tax

GAO was asked whether a federal employee was entitled to be reimbursed the amount of sales tax which was paid as a part of the charges for renting an automobile while on a househunting trip. The employee was authorized to make the trip incident to a permanent change of station. The certifying officer disallowed the employee's claim for reimbursement for the sales tax charged, based on the government's constitutional immunity from state and local taxation. Though the employee was listed as the lessee, the agency suggested that, because he was acting within the authority of an approved travel order, the legal incidence of the tax falls on the government. The government is exempt from paying this tax only if it, rather than the employee, is considered to be the lessee of the car. In the present case, the car was rented in the name of the employee, and the tax was attached to that rental. The government was never a party to this transaction, and there was not a direct contractual obligation by the government to the rental agency. The fact that the government became obligated to reimburse the employee for all reasonable expenses did not affect the employee's liability for the tax. Under these circumstances, the government could not assert its immunity from the payment of the sales tax levied on the rental car. Accordingly, the employee was entitled to be reimbursed the amount of the sales tax paid as part of the charge for renting the automobile.